Is Mutual Fund Family Retirement Money Smart?
69 Pages Posted: 18 Feb 2020 Last revised: 20 Oct 2020
Date Written: February 13, 2020
Using data on investments of fund family employees in their 401(k) plans, I show that employee flows predict fund performance up to two years. Moreover, employee flows lead flows of other investors, but not vice versa, further indicating that employee flows are smart. The predictive power of employee flows is stronger when fund family employees are located close to fund managers, pointing to employees exploiting their proximity to managers to learn about the managers’ skill or effort. The results do not appear to be driven by ownership changes of portfolio managers themselves, family cross-subsidization efforts, plan design, or employee sophistication.
Keywords: Mutual Funds, Smart Money, Managerial Skill, Defined Contribution Pension Plans, Retirement Savings
JEL Classification: G11, G14, G23
Suggested Citation: Suggested Citation